Hearing on President Obama’s Trade Policy Agenda with U.S. Trade Representative Michael Froman
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
COMMITTEE ON WAYS AND MEANS
SAM JOHNSON, Texas
|SANDER M. LEVIN, Michigan
CHARLES B. RANGEL, New York
JIM MCDERMOTT, Washington
JOHN LEWIS, Georgia
RICHARD E. NEAL, Massachusetts
XAVIER BECERRA, California
LLOYD DOGGETT, Texas
MIKE THOMPSON, California
JOHN B. LARSON, Connecticut
EARL BLUMENAUER, Oregon
RON KIND, Wisconsin
BILL PASCRELL, JR., New Jersey
JOSEPH CROWLEY, New York
ALLYSON SCHWARTZ, Pennsylvania
DANNY DAVIS, Illinois
LINDA SÁNCHEZ, California
JENNIFER M. SAFAVIAN,Staff Director and General Counsel
C O N T E N T S
Ambassador Michael Froman
United States Trade Representative, Office of the United States Trade Representative
Hearing on President Obama’s Trade Policy Agenda
with U.S. Trade Representative Michael Froman
U.S. House of Representatives,
Committee on Ways and Means,
The committee met, pursuant to call, at 9 a.m., in Room 1100, Longworth House Office Building, Hon. Dave Camp [chairman of the committee] presiding.
[The advisory of the hearing follows:]
Chairman Camp. The committee will come to order.
Well, good morning, everyone. I want to welcome everyone here today and extend a special welcome to United States Trade Representative, Ambassador Mike Froman. First of all, let me congratulate you on your confirmation. You are now leading one of the most professional and productive agencies in the United States Government. We are glad to have you here, and we wish you very well in your new responsibilities.
You take the helm of USTR at a critical juncture. We are in the midst of three major trade negotiations, all of which will need strong Administration leadership to complete. We are in deep into negotiations on the Trans‑Pacific Partnership, which I hope will be finished this year.
Earlier this month, you held the first round of negotiations for a U.S. EU Trade and Investment Agreement, which holds enormous potential economic benefit. A negotiation for a Trade in Services Agreement have begun, promising huge commercial gains and attracting new participants.
We had initially seen some encouraging movement at the WTO on expansion of the Information Technology Agreement and a trade facilitation agreement, but that progress seems to have stalled, particularly with yesterday’s announcement about China, forcing us to suspend ITA negotiations. We need to find a way around these obstacles in Geneva.
Each of these negotiations will support more, better‑paying jobs here in the United States by dismantling barriers to U.S. exports and creating robust enforcement mechanisms to prevent future barriers from emerging. These agreements will tackle tariff and nontariff barriers as well as new 21st century issues like state‑owned enterprises, regulatory coherence and trade facilitation. In addition, these agreements help to more deeply integrate U.S. companies into the global supply chains that are the reality of today’s marketplace.
Quick movement on these negotiations is important because other countries are signing agreements that open markets and increasing their competitiveness at our expense.
I look forward to continuing to work closely with you on each of these negotiations to ensure that each is ambitious, comprehensive and concluded as soon as possible. However, finishing these negotiations will not be easy. For example, in the TPP, I have serious concerns about Japanese nontariff barriers in the auto, insurance and agriculture sectors. In the EU, we face regulatory barriers to U.S. exports that must be resolved, particularly in agriculture.
I look forward to hearing your testimony on these issues and working together to ensure that these barriers and others are fully addressed before any negotiation is completed.
Another critical issue that has raised considerable concern is how to deal with currency in our trade agreements. I believe that currency misalignment is a serious problem, and I look forward to hearing more from you about how the administration plans to address this issue.
Last Congress we passed, and the President signed into law, seven bipartisan trade bills, including legislation that implemented trade agreements with Colombia, Panama, and South Korea. I hope to build on that bipartisan cooperation to move a bipartisan Trade Promotion Authority bill. TPA is essential so that we in Congress can outline our priorities for you, establish how you consult with us, and create the mechanism for considering implementing legislation.
It is no overstatement to say that the success of your work at the negotiating table absolutely depends on passing TPA, and we simply will not be able to enjoy the benefits of what we negotiate unless we have Trade Promotion authority.
I look forward to hearing today from you, Ambassador, about how the Administration plans to engage on this issue as well. In addition to negotiations, we must also pay attention to the challenges and opportunities presented by trading partners around the world. Take, for example, the major emerging economies, China, India, and Brazil. Each provides enormous potential opportunity, but also significant and growing barriers. We must seek ways to engage these countries constructively and address trade and investment issues. We should use our bilateral investment treaty agenda as one tool to address these concerns and also seek to expand our agenda to new partners.
Finally, I also note that we continue our work here in Congress on several important initiatives. I will continue to seek a path forward to pass as soon as possible the bipartisan Miscellaneous Tariff Bill, which Ranking Member Levin and I introduced yesterday, to provide tariff relief to U.S. manufacturers for products not made in the United States. Our bill remains a model of transparency with benefits available to any entity that uses the products covered by the bill, and I am very aware that last December duties increased for over 600 products.
Ranking Member Levin and I also introduced legislation yesterday to renew the Generalized System of Preferences, and we will continue to work together to find a path forward in this Senate that ensures that the Senate can move the bill without amendment. In addition, I hope to move a bipartisan customs reauthorization bill quickly.
A robust international trade agenda puts U.S. job creators back on the offense. Let us seize this opportunity.
Chairman Camp. I will now yield to Ranking Member Levin to make an opening statement.
Mr. Levin. Thank you very much, Mr. Chairman.
And, Ambassador, on behalf of all of us, if I might say so, a warm welcome.
With negotiations spanning the Atlantic and the Pacific illustrating that globalization is accelerating, we face major opportunities and challenges. I believe that this administration, in which you have played a key role, has, on some important occasions, demonstrated a broader vision of international trade. It has helped to create jobs through exports, while also looking actively at the impact of imports. It is working to incorporate enforceable worker and environmental standards in trade agreements. It has been more active in enforcement, from initiating WTO cases to applying the China safeguard on tires, to creating the ITEC. It has responded to a series of tragedies in the factories of Bangladesh, tragedies that have shaken conventional resistance to building some basic standards to shape the human impact of the heightened flow of international trade.
As USTR, you face many challenges: forced localization in China and India, for example; continued concerns about labor rights in Colombia; evasion of antidumping duties; even the future success of the WTO.
TPP can expand our imports in many sectors, including services which are also under negotiation in Japan. While there are many outstanding issues, Japan’s engagement raises a broader policy question: whether and how to address one‑way trade, a very unlevel playing field.
The U.S. has had massive trade deficits with Japan for decades, the vast majority in the auto sector where Japan is taking advantage of a completely open U.S. market, while Japan’s has been tightly locked to imports from us and anywhere else. If the principle of two‑way trade really matters, and I believe it does, we need to chart a course to achieve it. What the U.S. negotiates with Japan could have important impacts on the U.S. economy and also how TPP would be received in Congress. I am working with stakeholders to develop a proposal and hope to share it next week.
The Transatlantic negotiations also provide an opportunity to expand our exports and strengthen our economy. Just as important, they can establish new rules for global trade, promoting an equitable and market‑based economic model over the emerging model of, in quotes, “state capitalism.” These negotiations won’t be easy, but our relationship with Europe is unlike any other. We should build upon the strength of that relationship, and it should reflect our many common objectives and values, while also respecting our differences.
The discussion on TPA has begun, and there is widely shared interest in getting it right. First, TPA sets the rules for engagement between Congress and the administration. A significant sustained role for Congress is critical. Today trade agreements address a broad and growing range of policy areas, so Members of Congress must play an active role in their development. There is also a chance that more effective, broader congressional involvement, and I would like to emphasize this, would help to establish more common ground in Congress for trade agreements.
Second, the TPA process must be a vehicle in crafting a broader strategy, as we did in 1988, to tackle the increasing challenges and potential benefits of globalization and enhance U.S. competitiveness. Since we last considered TPA, the U.S. has experienced the largest trade deficits in our history, contributing to lost jobs. These imbalances have more than one ingredient. One source often stems from trading partners refusing to play by the rules.
As the chairman mentioned, currency manipulation is a vivid example. There is precedent preparing TPA with currency legislation. We did so with the very first TPA bill in 1974, and we did it again in the 1988 act. The House and Senate have both passed currency legislation, and this issue needs to be part of the TPA, TPP and T‑TIP. We are going to have trouble keeping these three things separate, aren’t we?
So I close to mention this of interest, I know, to you in your new position. With sequestration, USTR, like many other agencies, is working under difficult personnel constraints. We need to help ensure that the administration can continue ‑‑ can continue to devote the needed resources not only to negotiating new trade rules, but to enforcing those that exist.
So, Mr. Ambassador, it is nice to call you that, we look forward to working with you.
Chairman Camp. All right. Thank you.
Chairman Camp. We will now turn to our witness. I want to welcome Ambassador Mike Froman again to the committee, and thank you very much for being with us today. You have five minutes to present your testimony, and your full written statement has been submitted for the record. Mr. Ambassador, you are recognized for five minutes.
STATEMENT OF MICHAEL FROMAN, UNITED STATES TRADE REPRESENTATIVE, OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
Ambassador Froman. Thank you, Mr. Chairman, Ranking Member Levin, members of the committee. Thank you very much for having me mere today. There is a long tradition of partnership between the Ways and Means Committee and the U.S. Trade Representative, and that is a tradition I plan to continue.
As President Obama’s advisor on international economic issues for the past 4 years, I have had the opportunity to work with many of you on a number of initiatives, including those that are now my full‑time focus: opening markets for American goods and services and, in doing so, supporting jobs here at home.
We have made important progress over the past 4 years. Exports are at an all‑time high. Increases in U.S. exports have supported more than 1.3 million additional American jobs and have accounted for more than one‑third of U.S. GDP growth over this period. I am pleased that you invited me here today because there is so much more that we need to do together.
As President Obama has made clear, our focus must be to promote growth, create American jobs and strengthen our middle class. USTR can contribute to this effort in three important ways: First, by opening markets around the world so we can expand our exports; second, by leveling the playing field so that our people can compete and win in the global economy; and third, by ensuring that the rights and trade rules we have fought so hard for are fully implemented and enforced.
Trade policy, negotiated and enforced vigorously to reflect both our interests and our values, gives our workers, farmers and ranchers, our manufacturers and service providers, our innovators, creators, investors in businesses of all sizes the best chance to compete around the world.
The President has laid out one of the most ambitious trade agendas ever, and we at USTR are committed to getting it right. Last week, U.S. and EU negotiators completed the first round of Transatlantic Trade and Investment Partnership, or T‑TIP, negotiations with the ultimate goal of enhancing what is already the world’s largest trading relationship. And as we speak, USTR negotiators are in Malaysia, hard at work negotiating the groundbreaking Trans‑Pacific Partnership, or TPP, a 21st century agreement that raises standards and introduces new trade disciplines.
We are working on fresh, credible ways to energize multilateral trade liberalization at the WTO. We are working to negotiate a trade facilitation agreement, and we hope to make progress on an information technology agreement. Our services negotiators are hard at work negotiating a high‑standard trade in services agreement, or TISA, that will allow our already competitive services providers to compete for global business on a more level playing field.
If we are able to complete these agreements, and I say if, because let me be clear, it is better to have no agreement than a bad agreement, we will have created free trade with 65 percent of the global economy. These agreements hold real job‑supporting export potential for manufacturers in Michigan and Pennsylvania, farmers and ranchers in Wisconsin and California, and service providers in New York and Massachusetts.
Trade policy can only work, however, if it is fair. American workers are the most productive in the world. They deserve a level playing field to compete on, and this administration is taking a tough approach to trade enforcement, filing 18 cases to enforce our trade rights. The Interagency Trade Enforcement Center, or ITEC, has further enhanced the complexity, depth and reach of the administration’s enforcement efforts.
The Obama administration is committed to pursuing freer trade, but we are equally committed to enforcing our trade rights and providing skills and opportunities for workers, including through the Trade Adjustment Assistance Program, which expires at the end of this year.
Trade is also a powerful tool for our broader development policy. I recently returned from Africa where President Obama announced a Trade Africa Initiative, working with a new generation of reform‑minded leaders in some of the poorest countries in the world who are focused on pursuing policies of trade, not just aid; investment, not just assistance as the key to sustainable economic development.
In that regard I am encouraged by the introduction yesterday by the leaders of this committee of a bipartisan bill to extend GSP, and I look forward to working with you to ensure the seamless renewal of AGOA before it expires in 2015.
Trade policy fulfills its greatest potential when it is the product of close consultations between the administration, Congress, and a wide range of stakeholders. Transparent collaboration leads to better policies and better outcomes, and while USTR has done much to advance transparency in recent years, in my view, we can always do better, and here, too, I look forward to consulting with you as we explore what further steps should be taken.
Let me say a word about an issue I know of importance to many of you, trade promotion authority, or TPA. As I said in my confirmation hearing, TPA is a critical tool, and as the leadership of our committees undertake a process to develop a TPA bill, we stand ready to work with you to craft a bill that achieves our shared interests.
Finally, all of these things I have mentioned, all of our shared goals, are contingent on USTR having the resources to pursue its mission. We are managing our resources aggressively, and we will do our best to achieve our priorities with whatever resources we have, but to be frank, I am worried. At a time of unprecedented levels of activity, sequestration and other budget cuts are compromising USTR’s ability to conduct trade negotiations and other market‑opening efforts as well as to initiate new enforcement actions. Financial constraints are forcing us to make difficult decisions every day, and the opportunities we miss have real effect on whether or not your constituents are getting the full benefits of a robust trade policy and the jobs and growth promised by our trade agreements.
With that, let me thank you again for inviting me to testify today. I am happy to take your questions.
Chairman Camp. Well, thank you very much.
[The statement of Ambassador Froman follows:]
Chairman Camp. Mr. Ambassador, I have been working with Mr. Levin and our counterparts in the Senate on a bipartisan, bicameral basis to develop TPA legislation. As I mentioned, I believe you need this authority to bring TPP to a close, as well as the other things you mentioned, the EU agreement, services and other negotiations, because, as I said, it gives the administration the backing of the Congress and a clear sense of what our negotiating objectives are.
While we are making progress, we will not be able to do that without the administration’s full involvement and engagement, and I welcome your statement both at your confirmation hearing and again today that the Administration is asking for TPA, that you believe it is a critical tool, but we really do need to be full partners in this venture if it is to succeed.
What exactly are you and the President doing to help build the case for TPA?
Ambassador Froman. Well, Mr. Chairman, I think the President and the rest of the administration has been very much discussing the importance of our trade agenda, the implications of our trade agenda for a larger economic policy, and are fully committed to moving forward with what is necessary to get our trade agenda done.
With regard to TPA specifically, the bipartisan leadership of this committee and of the Senate Finance Committee I know are beginning a process or working on a process to develop a bipartisan TPA bill, and we stand ready to engage and to help in that process as requested.
Chairman Camp. Regarding TPP,as I said, I am committed to working with you on that, and I think a robust agreement will have significant benefits for the U.S. economy and support job creation and better‑paying jobs here.
Japan’s scheduled entry next week, I think, raises some very significant concerns. Japan’s entry into the negotiations, should not be allowed to undo the work that has already been completed. I think a robust package fully addressing Japan’s nontariff and tariff barriers that have been long‑standing, as Mr. Levin mentioned, particularly as they relate to auto, agriculture and insurance exports will be essential to obtaining my support for this agreement.
But first, what steps are you taking to ensure that Japan will resolve these outstanding barriers to trade?
Ambassador Froman. Thank you, Mr. Chairman. And this is a very important issue to us, as we appreciate your leadership and the leadership of Ranking Member Levin on this issue as well.
Before ‑‑ we had extensive consultations with Japan prior to agreeing to allow them to join TPP precisely on the issues you mentioned, on agricultural issues, on insurance, and on the auto sector, and we insisted on making progress on those issues before they were allowed to come in, and we reached some upfront agreements in certain areas, but also reached agreement on terms of reference for ongoing negotiations in these areas that will be linked to and part of TPP.
So, for example, in the agricultural area, they moved forward with their agreement to allow American beef into their markets in 30 months and under. On the insurance area, there is a standstill for the introduction of new products through their postal system and an agreement to negotiate, and terms of reference for that negotiation, for further opening of that market. And on autos, very importantly, we reached upfront agreements both on measures to allow greater access to the Japanese market by more than doubling what they call their PHP program, which allows expedited entry of U.S. vehicles, but also we reached agreement on how the staging of U.S. tariffs will be done in the context of the overall TPP negotiations, and we laid out a negotiation on all the nontariff barriers, or many of the nontariff barriers that you referred to, and made it clear that negotiation of an agreement, an adequate and acceptable agreement on that, on those nontariff barriers, will be a key part of the TPP agreement, will be binding, will be subject to dispute resolution.
So we share, very much share, your concern and your focus on the importance of opening up Japan’s market as part of their entry into TPP, and we believe we have structured an engagement with them through TPP and in parallel to TPP that can achieve that objective.
Chairman Camp. As a follow‑up to that, I have heard a from various stakeholders and Members of Congress about Japan’s currency practices, and their past practices, you know, very serious concerns, particularly its uncoordinated intervention in 2011. Treasury flagged its concerns about those interventions in its semiannual currency report, and I have raised this issue with it before.
Are you considering including provisions on currency in the TPP, and what would those provisions look like? What factors should be taken into account in determining the U.S. position with regard to those?
Ambassador Froman. Well, Mr. Chairman, we share the concerns about ‑‑ about currency. Clearly, obviously, Treasury has the lead on these issues, but these issues have been very much at the top of our agenda, engagement with countries of concern. China, for longstanding ‑‑ there has been a longstanding dialogue with China about its currency policy, and whether it is through the G7 in the case of Japan, or the G20, IMF, elsewhere with regard to China, we made very clear the importance of exchange rates being based on market‑determined forces and our opposition to ‑‑ in the G20, for example, making it not just our opposition, but opposition of the bulk of the international economy to efforts to manipulate currency or to engage in competitive devaluation.
So we do see this as a very important issue, and we explore, and we pursue it in the way that we think is most effective at each juncture.
Chairman Camp. I just think it is a real concern that we not allow this agreement to slip, that it needs to be concluded this year, and I think the active engagement of the administration on this issue is critical if we are to conclude TPP this year. So thank you for your responses.
Mr. Levin is recognized.
Mr. Levin. Thank you.
Let me just say, Mr. Chairman, on currency, I think the administration needs to face up very directly to the question of inclusion of currency issues in both TPP and the discussions with Europe. And I don’t think there has been satisfaction here with progress today, and so we just have to confront the formal introduction of this issue in TPP as well as with Europe.
And let me just say this to ‑‑ to TPP in Japan, there is immense pressure on Japan, and they really haven’t been very unequivocal about addressing rice and other agricultural issues. And as a number of us said before, and I will spell out more of this in the coming days, I don’t think what has been put forth so far on autos is likely to change decades of the same situation.
Mr. Camp joined us in addressing this issue in Korea, and the agreement was changed and strengthened. Japan is an even sterner case. Nothing, to date, has ever worked. We are today, in terms of our access to Japan’s auto, automotive, its parts as well as assembled vehicles, essentially where we were 34 years ago. So we need to have a very emphatic dialogue on this, and I am sure we will.
So let me just say a word and ask you about TPA. I think it is important, Mr. Chairman, that all of us work together on TPA to determine what kind of a TPA, and not simply say, “Let us just do it.” We have been through this before. In the 1980s, we had a fast track that was worked out that had rather strong bipartisan support. That fell apart in 2002, and it passed by, I think, three votes, keeping, as I remember, the vote open for awhile to see if those votes could be secured.
And with the burgeoning globalization, I think we need to sit down on a bipartisan basis with the administration to determine issues like what will be the role of Congress; what will be the objectives stated in a TPA; what will be the role of Congress in seeing that these objectives are kept; and then, related to it, the whole issue of transparency; and what access not only members of the committee, very importantly, in finance, but others have to the negotiations that are under way.
And I think we just want to have, on our side, your assurance that there will be a very active discussion of these issues, because simply to say, let us pass it, without focusing on its contents, I think, is a serious mistake substantively, and procedurally would likely lead to much more conflict instead of confluence. So just briefly your reaction.
Ambassador Froman. Well, thank you, Congressman Levin. We certainly, as I said, stand ready to work with you‑all in your process as you proceed to develop a TPA ‑‑ a TPA bill to ensure precisely what you say, that it reflects our shared interests and our shared goals. And so we will look forward to ‑‑ we will look forward to that.
On transparency in particular, we think that is a very important issue. We think it is critically important that vis‑a‑vis Congress, vis‑a‑vis our advisors, vis‑a‑vis the public, that we have a robust policy of engagement to ensure that we are getting the best input, and that we are also explaining what it is we are doing, how it is we are doing it, and why it is we are doing it. And we are looking at those, the whole array of policies and procedures that we have, to determine how best to take that forward. I think we have done a lot over the last few years, and I will just mention one example.
You know, we now have had our negotiations. TPP, we started this, and we just did it again last week with T‑TIP, we organized an event for stakeholders to come and be able to present directly to negotiators, not just U.S. negotiators, but our trading partners as well, and so they can have a direct dialogue with them. We had 350 people come to the session last week to be able to present those ‑‑ their ideas. That is something that has never been done before, but as I said, I think we can always do better, and we look forward to working with you on that.
Mr. Levin. Thank you.
Chairman Camp. Thank you.
Time has expired, and because today’s hearing has to end at 11:00, in order to try to accommodate every Member who wants to ask questions, Mr. Levin and I have agreed that we would limit Members’ questions to 3 minutes.
Mr. Johnson is recognized.
Mr. Johnson. Thank you, Mr. Chairman.
Mr. Froman, first, I want to thank you for being here with us. It is a delight to see you, and while I was sad to see my good friend and fellow Texan Ron Kirk move on, I am sure you will be equally up to the task.
As you know, trade is very important to our home State of Texas, and recent data shows that the Dallas/Fort Worth area alone was responsible for 26‑plus billion in exports. Over one‑quarter of all manufacturing workers in Texas depend on exports. That is why I think it is critically important that Congress develop and pass bipartisan trade promotion authority that set out negotiating objectives.
For the ongoing negotiations you have already outlined, do you think that your negotiations can be concluded and any agreement implemented without trade promotion authority? And is the administration, in your opinion, prepared to actively engage with the Congress to build political support for TPA?
Ambassador Froman. Thank you, Congressman.
We think TPA is a critical tool, and we stand ready to work with the committees as they develop a bill that addresses our shared interests and our shared goals. We are engaged in these negotiations, we will continue to pursue them aggressively, and we consult very actively with this committee, with the finance committee and other committees of jurisdiction to ensure that we have the input with regard to our negotiating objectives and how those objectives are translated into actual proposals at every step in this process. And so we feel confident that as we are negotiating, we are taking into account the input that we have received from our ‑‑ from our committees of jurisdiction.
Ultimately, to get through Congress, we think TPA would be very useful for the ultimate agreements to get through Congress, and in the meantime we will operate according to the longstanding procedures we have of consulting with you‑all and your colleagues in the Senate and making sure that what we are doing with regard to our negotiating objectives are consistent with the input that we have from you.
Mr. Johnson. Thank you, sir. Welcome aboard.
Chairman Camp. Thank you.
Mr. Rangel. Thank you, Mr. Chairman.
And I join with the committee in welcoming you, looking forward to one possible bipartisan effort that this Congress can participate in. We do have a record of sorts in working together, and, with your help, we look forward to improving even on that. I would like to report that our staff feels very comfortable with the relationship we have with your office and ask you to continue that, because many times we have to depend on staff with our views, and it makes it a lot easier for us to get some type of agreement before something is presented to us than trying to convince each other that we are right.
You have answered many of the questions that I have. I would be interested in seeing how America, as a result of the President’s trip to Africa ‑‑ exactly what plans we have to be competitive with China and other countries that have taken advantage of this economic growth that has taken place. And also, when you talk about supporting jobs, it is very important that your office understands that to a person that is unemployed or those protecting the workers, you say “trade,” and some people automatically think that means losing jobs.
You have to help us in working with the Education Department and Department of Labor so that we can present new job opportunities that are going to be involved country by country, and where we are going to lose because we cannot compete, we have to talk about training and retraining as though we are just talking to Americans and not to importers and exporters, because we all are looking toward for the same goal.
And again, I don’t have to tell you that we have to be competitive with countries. With our automobile industry and what we have been through, I don’t think it should be a hard sell that people should not put barriers up when we are competing with a good product. There were changes that we had to make in Detroit during the crisis, and made those changes. But we look forward to working with you, and when you think of trade, trade, trade, some of us have to ‑‑ are forced to think about jobs, jobs, jobs.
So, welcome on board.
Ambassador Froman. Thank you, Congressman. That is a very healthy reminder that this is all about jobs, jobs, jobs in the U.S., and we need to do a better job of talking about how what we are doing through negotiations or through enforcement leads to greater exports, leads to greater jobs and higher wages, allows us to deal ourselves into global supply chains rather than being on the outside of them. And I look forward to working with you on Africa, on training, on the auto sector, and the whole array of issues.
Chairman Camp. All right. Thank you.
Mr. Brady is recognized.
Mr. Brady. Ambassador, congratulations on your new role. Thank you for the critical role that you played in reaching sales agreements with Colombia, Panama, and South Korea. Our local businesses’ workers are looking for new customers, and those agreements that you played a critical role on have leveled the playing field and allowed us to compete. So it is creating both new jobs in my region and neighborhood, and more secure jobs as well. So thank you for that role, look forward going forward.
To that vein, I want to ask two questions, one about the Trans‑Pacific Partnership, a critical region for those new customers, and the role of the bilateral investment treaties going forward. On the timetable for TPP, do you see that completed by the end of the year and being submitted to Congress shortly thereafter?
Ambassador Froman. With regard to TPP, we have stated that our objective is to finish it this year. It is ambitious, but our negotiators are hard at work as we speak in Malaysia, and we are going to work very hard with Japan when they get in to bring them up to speed and not allow them to reopen or re-litigate or delay the negotiations. So our focus is to try and get this done this year.
Mr. Brady. Do you think there is a good chance we can do that? Always the tougher issues come at the end, you know what I mean, a little more unpredictable as you are sort of near the finish line, but are you optimistic that we can finish in that timetable?
Ambassador Froman. Yeah, I am. I think it is ambitious, but I think it is doable.
Mr. Brady. Great.
On the bilateral investment treaties, those are important because they really take a big first step toward a level playing field, and they can also provide protections for American investment when we are chasing those customers around the world. We, as a government, in the first term the President took a look at the bilateral investment treaties. We sort of pulled the truck to the side of the road, took a look at the engine, made some adjustments, but now it is really time to get back on down the road, and it is an important tool.
So, as we look at China, India, Pakistan, as we look at Africa and other areas, B, do you see bilateral investment treaties as an important tool; and, two, are you going to use them to advance our trade agenda?
Ambassador Froman. Yes, Congressman. I think they are an important tool, and we will use them as appropriate. And I would just note that last week we had the strategic and economic dialogue with China here in Washington, and one of the outcomes was China agreeing to engage in bid negotiations on the basis of some of the key principles of our bid, including national treatments in the pre-establishment phase, and on the basis of coming up with a negative list rather than a positive list.
Now, obviously, the devil will be in the details, and we have not yet even begun to negotiate, and it will be very important to make sure that those ‑‑ those commitments are implemented fully, but it is a potentially very positive development both in terms of our bilateral relationship, but also what it will require China to domestically in terms of its ‑‑
Mr. Brady. No, I agree. I think that is an important role in China and in the other regions as well. Thank you, Ambassador.
Chairman Camp. Thank you.
Mr. Neal. Thank you, Mr. Chairman. Thank you, Mr. Chairman. Three questions quickly. I know this is an abbreviated opportunity to ask them.
First, footwear in New England, we are down to New Balance, small operations after that, ensuring their success. They are the last ones to really ‑‑ in New England to do athletic footwear, very important part of our economy, and certainly interested in what the administration’s position is going to be.
And on enforcement procedures with competition, can you address the issue of financial service and regulatory issues in the U.S. and EU? Did it come up in the first round of discussions? And an opportunity for you to hold forth on the President’s goal as to whether or not we have been able to double exports, or are we on a path of doubling exports during the 5 years that the President has outlined, understanding it really is, last year, I think, the fastest part of American economic growth in trade and trade‑related issues. So, abbreviate it, but the opportunity is yours, Mr. Ambassador.
Ambassador Froman. Thank you, Congressman.
On footwear, that is obviously a very sensitive sector, and we are looking at our domestic producers, our importers and our retailers to come up with a proposal that maximizes job creation and jobs supported by trade in footwear in the United States. But we are well aware of the sensitivities there, and indeed I will be visiting ‑‑ I am planning to visit the New Balance factory sometime later this summer.
Mr. Neal. Thank you.
Ambassador Froman. On financial regulation, yes, we have had extensive discussions with the Europeans about this, and our view is the following. The financial services sector is a key part of the Transatlantic relationship. It cannot be left outside T‑TIP altogether. We think financial services market access belongs in a trade agreement, but since the financial crisis of 2008, 2009, there has been an explosion of regulatory cooperation activity bilaterally through the G20, through the FSB, the BIS, the IOSCO, IASB, and we think that those processes should be encouraged to make progress in parallel alongside the trade agreement so that when the trade agreement is done, we can look back and see that we have managed to bring the two markets closer together.
Mr. Neal. Lastly, are we on the President’s ‑‑
Ambassador Froman. On NEI. The President laid out goals of doubling exports and increasing jobs supported by exports by 2 million. We have increased jobs supported by exports by 1.3 million. I think we are broadly on track. On the doubling of exports, a number of markets around the world, we are at or above the run rate that would have as double exports, but to be frank, with the headwinds in Europe over the last couple of years, that has been a drag on our overall export growth, and we are going to need to continue to do everything we can do to ‑‑ in terms of our export promotion efforts, but also opening markets and focusing on enforcement ‑‑ to continue on the path towards doubling exports.
Mr. Neal. Thank you, Mr. Chairman.
Chairman Camp. All right. Thank you.
Mr. Nunes. Thank you, Mr. Chairman.
I want to echo Mr. Rangel’s comments that not only does the staff here work in a bipartisan manner, but we also enjoy this long‑term relationship with your staff, and we hope that that continues.
I would like for you to quickly address SPS enforcement mechanisms, specifically dispute resolution as it relates to the TPP. I know we have a short time, so I will leave it at that, and then I have one additional question.
Ambassador Froman. This is a critical part of our ‑‑ of our negotiation, and as we propose SPS‑Plus disciplines in TPP, we want to make sure we have mechanisms for ensuring that those disciplines are fully implemented.
The substantive disciplines of SPS‑Plus are really rooted in the WTO and the WTO commitments, and there, of course, binding dispute resolution is available. The other elements of SPS‑Plus are procedural elements, and most of those are also subject to dispute resolution in ‑‑ under TPP. So we think that the bulk of the commitments that we are likely to achieve in TPP in the SPS chapter will be subject to enforcement either under the WTO or through this consultative mechanism in TPP, leading to a dispute resolution on the procedural elements.
Mr. Nunes. Well, we look forward to continuing to work closely with you. As you know, American agriculture is strongly behind getting some type of enforcement mechanism in the TPP negotiations.
I would like to, with the remaining time, for you to address our ongoing relationship and ever‑improving relationship with Brazil. We had a hearing on Brazil about a month ago, and we are looking at possibly doing some legislation to kind of redouble our effort on our trade relationship with Brazil. And I know that you have met with them recently, and I know that they are ‑‑ I think they are sending a delegation here in the fall, and, you know, what we can do from this committee and the Congress to improve those relations.
Ambassador Froman. Well, thank you. Clearly Brazil is an incredibly important country in the hemisphere, and we think really has the potential to be an even closer economic partner of us going forward. We have had a lot of dialogue with the Brazilians, both business community to business community, but also over energy, over trade issues, and we try and make progress through these dialogues on our outstanding issues.
The President visited there, as you know, a couple of years ago. We talked about wanting to be a strategic energy partner of theirs as they develop their new energy resources, and we have had discussions with them about, for example, pursuing a bilateral investment treaty, as that would be a next step towards deepening our relationship. They have not yet responded positively to that, but we will continue to have those discussions, including as high‑level visits continue later this year.
Mr. Nunes. We are looking at possibly consolidating the dialogues into kind of a more clairvoyant structure. Is that something that you would think would be helpful to get high‑level dialogue between not only your office, but also the Congress?
Ambassador Froman. I am happy to talk further with you about that. We have got an energy dialogue, a CEO forum. We have a, I believe, a commercial dialogue as well, and we try and use each of these to make progress on their respective agendas. And, of course, our two Presidents have a good relationship and have an ongoing dialogue, and we expect to see more of that in the future.
Mr. Nunes. I thank you, Ambassador.
Thank you, Mr. Chairman.
Chairman Camp. Mr. Doggett, and after Mr. Doggett I will proceed two to one.
Mr. Doggett. Thank you, Mr. Chairman.
Thank you, Ambassador, for your testimony. With your stated objective of finishing the Trans‑Pacific agreement by the end of this year, what do you view as the deadline for Congress approving fast‑track authority for President Obama?
Ambassador Froman. Well, thank you, Congressman. I don’t think it is for me to give a deadline to Congress.
Mr. Doggett. Just tell us by when you think you ‑‑ I understand you are a diplomat first off.
Ambassador Froman. We look toward to working with you as you‑all proceed with your process on TPA. I think our negotiators are going to proceed apace, and they are proceeding apace as we speak. I think having TPA before we bring an agreement to Congress is very important.
Mr. Doggett. So it will be sometime next year?
Ambassador Froman. I think getting the TPA right is important, and I think getting it in time to ‑‑ before the bill ‑‑ the trade agreement is ready to be submitted to Congress would be a great help.
Mr. Doggett. And the thinking of the Obama administration is that it cannot get the Trans‑Pacific Partnership Agreement approved in the fashion that it would like to have it approved without fast‑track authority.
Ambassador Froman. I think traditionally, I think all but one trade agreement in history, I believe, in the ‑‑ at least since the 1980s, has been approved under some form of trade promotion authority, and I think that that is likely to be the most productive way of moving forward on TPP as well.
Mr. Doggett. So you are not saying you couldn’t do without it. Actually during the time I have been on this committee, I think most of the trade legislation has been approved without fast‑track authority. But you would view it as essential to your work, or are you saying you can do without it?
Ambassador Froman. Well, no, no, no. I think, again, I was just assuming between trade agreements and trade legislation, I think with the exceptional of the Jordanian FTA, all other FTAs have been approved under some form of fast‑track authority. I haven’t thought through what it would mean to try and proceed without that kind of authority, but I am happy to work with the committee, and, of course, we stand ready to work with you as you work on your process.
Mr. Doggett. In your work on TPP, has USTR undertaken or requested that anyone undertake any studies concerning the economic subsectors where we will see job growth and those where we will see job loss?
Ambassador Froman. I think there has been a lot of work done by various think tanks and other research centers. I am not aware of what has been done when TPP started 2‑1/2 years ago. Oftentimes there is a study done by the ITC, and I am not sure whether that was done in this case or not, but I am happy to look into that and get back to you.
Mr. Doggett. It is not ‑‑ isn’t that a factor in your negotiations?
Ambassador Froman. Well, we certainly are looking to open markets for all of our sectors, and we consult very closely with stakeholders and get their perspective on where they see the opportunities for expanded exports and job creation, and that helps inform our priorities as well.
Chairman Camp. All right. Thank you.
Mr. Reichert. Thank you, Mr. Chairman.
And welcome. Good to see you again. I want to echo some of the comments made by Members here. The working relationship we had with the Ambassador Kirk and his team, I hope, continues with our staff. And I know that our staff is in continuous conversation with yours, and we hope that continues.
I just want to make a quick comment about TPA. We know that you don’t have to make a formal request for that authority, It is Congress’ job to move forward with that, but I think there is a perception that goes back to, I think, the Korean agreements and goes back to the ascension of Russia into the WTO world that the administration wasn’t, you know, as actively involved in that process and those processes as we would like to see. And so I think there is the perception today that the administration may not be as aggressively involved as we would like to see them be in helping us promote the idea of the tremendous need for TPA, so I am going to encourage you to be a more active ‑‑ and the President to be more active in that regard.
But I also want to ask a question. On TPP, you mentioned that you, you know, have a focus to get this done by the end of the year. I want to get a little bit more specific. I would like to know what your strategy is to get it done by the end of the year, and is there anything we can do to help you get that accomplished?
Ambassador Froman. Well, our strategy is to work very hard, and we are working around the clock.
Mr. Reichert. Any more details than that?
Ambassador Froman. I am happy to go through more details with you, but, look, the team at USTR is doing a phenomenal job. It is a very complex negotiation; 11 and soon to be 12 countries in the negotiation. We have 29 chapters. Many of the issues we are dealing with are new issues, issues that none of the countries around the table have negotiated before in any agreement, and that is an ongoing mutual learning process.
We have done a lot of work over the last 2 years to close out chapters, close out issues, park issues. They are engaged, as we speak, right now in trying to move that agenda forward, and they will be meeting with the Japanese at the end of this ‑‑ at the end of this round to welcome them into the discussions and bring them up to speed on the status of the negotiations.
But we have ‑‑ our strategy is to work country by country, issue by issue, and to get a sense, as we ‑‑ particularly as we enter the end game of where the trade‑offs are going to be and how best to come up with a deal that everyone will find in their mutual interests, but that raises the overall standards and achieves the level of ambition that we set out.
Mr. Reichert. So we know that your staff works hard, so the fact that they work hard, and that is your strategy, we can count on them, the timeline being the end of the year.
Ambassador Froman. Well, that is our objective. As I said, it is ambitious, but it is doable, and we are doing to do everything we can at all levels of government to try and make that happen.
Mr. Reichert. Thank you, Mr. Ambassador.
I yield back.
Chairman Camp. All right. Thank you.
Mr. Boustany. Thank you, Mr. Chairman.
The Trade in Services Agreement, or TISA, has massive potential, commercial potential, and could be a major source of job creation for U.S. firms. And if you look at our economy, we have a competitive advantage in this area clearly, with 75 percent of the U.S. GDP being in services, 80 percent of the private sector employment, and currently 30 percent of our exports.
As I look at TISA, 70 percent of the world market is represented with those countries, and yet several high‑profile events have come and gone. I was glad to hear you mention TISA in your testimony today, but in previous occasions, we have not heard the White House or the administration put the kind of emphasis that needs to be put on this agreement. I think it should be given as much emphasis as TPP and the EU negotiations.
I sent a letter this week, earlier this week, talking about some of this, and I just want to get your assurances that TISA will be given the priority it really deserves going forward, because I think the potential is immense.
Ambassador Froman. Well, Congressman, I totally agree, and we think this is really one of the most promising areas of trade globalization going on in the world right now. And we have a terrific ambassador in Geneva in the form of Michael Punke, who is leading those negotiations with our team back here. And as you say, it represents 70 percent of the global services market, so we think it is a very significant ‑‑ it could be a very significant market that we hope other countries may join over time.
So we very much agree with you on the importance to our economy, to our jobs in the United States, to promoting growth here in the United States, and we are optimistic that we will continue to make progress.
Mr. Boustany. Yeah. My home State is Louisiana, and we are an energy‑producing State, and in the energy sector this could be really beneficial. I was with Chairman Nunes down in Brazil, and they are struggling with the right kind of expertise and technology to develop deepwater resources as well as shale. Other countries have the same concerns. We have the expertise. We have the engineering services and so forth.
Mr. Boustany. Yeah. Agreed.
Ambassador Froman. So we should move forward. Yeah, thanks.
Mr. Boustany. I yield back.
Chairman Camp. Thank you.
Mr. Thompson. Thank you, Mr. Chairman. Thank you for having the hearing.
Ambassador, thank you for being here, and congratulations. We look forward to working with you.
The chairman started off talking about some tariff and nontariff barriers as it pertains to agriculture, and I would like to pick up on that. I represent an area that has a very significant agricultural component. We produce some of the best wines in the world, and some of the T‑TIP and TPP countries present some pretty good barriers for our product. And so I would like to be able to get a good commitment that we work together to make sure that we lower these barriers and work to protect this important agricultural product that we have. The 2006 bilateral Wine Trade Agreement with the U.S. and the EU was a good start, and I would like to make sure that we continue that.
Along the same lines, counterfeit and imitation wines that are made by other countries that try and capitalize on our brand are a real problem, and our geographical indicator system works well, and I would like to make sure that we work to protect that as well.
And another agricultural product that is important to California is our rice, and recently the President and Japan’s Prime Minister sent a joint statement that said, and I will paraphrase, all tariffs are on the table. And the U.S. rice industry would like to very much make sure that this holds true to rice, and that we don’t exempt rice in any agreements that are coming in, and that we include them and you work with them as we work towards facilitating this particular market.
And then lastly you had sent a letter to some of our Senate colleagues talking about apparel rules in textiles, and I think you said that appropriate balance between divergent views was important, and I hope we can find more opportunity for trade liberalization other than just short supply issues. And I look forward to working with you on all of these issues.
Ambassador Froman. Well, thank you, Congressman.
Let me just say that with regard to the agricultural issues, agricultural trade is at an all‑time high. Our exports last year, I think, were $140 billion. We see this as a tremendous opportunity for expansion. We are working very closely with Secretary Vilsack and USDA to ensure that we are doing everything that we can to promote agricultural trade in all of our agreements. That is why, as Congressman Nunes mentioned, the SPS‑Plus agreement is important in ‑‑
Mr. Thompson. Some of our tariff and nontariff barriers are at an all‑time high. Also, if you look at China, when we send our U.S. wine there, we are paying about 56 percent combined tax and tariff, and it is terribly prohibitive.
Ambassador Froman. These are all issues we want to work on in the context of these hearings.
Mr. Thompson. Thank you.
Chairman Camp. Thank you.
Mr. Buchanan. Thank you, Mr. Chairman.
And I really look forward ‑‑ and congratulations, Mr. Ambassador. Looking forward to working with you, and I am sure the committee does, on a bipartisan basis.
I am from Florida, and these trade agreements, the FTAs we just did with Panama and Colombia are huge to Florida. And I just see the ‑‑ what trade means to Florida with 14 ports is 550,000 jobs, so $70 billion in economic activity.
But I also grew up in Michigan. So I take a look at ‑‑ just curious, from your standpoint, you look at a lot of the coastal communities, huge benefits in terms of trade, the President talking about doubling trade, 95 percent of the marketplace outside. But then you will see different parts of the country, somewhat the Midwest and other areas, that don’t benefit as much as the ‑‑ many at times the coastal communities. What is your thought on that, what we could do more to help more States feel like it is a win‑win for them as well on trade?
Ambassador Froman. Well, thank you very much, Congressman. From our perspective trade is part of the broader economic strategy of creating jobs and promoting growth, strengthening the middle class, and that has got to work across the country. And, obviously, different parts of the country will be affected in different ways, but it is one reason we put so much emphasis on our manufacturing policy in the administration and making sure that our trade policy is supportive of our manufacturing policy. We want to make sure that it is ‑‑ even as we export additional services, and we export additional agricultural products, that we are also building a stronger manufacturing capability in the United States.
Mr. Buchanan. Another quick question because we only have 3 minutes. The question I wanted to really kind of get to is I was in Beijing in January, and, you know, they have AmCham, which is about 4,500 members in the chamber, U.S. businesses in the chamber there. And, of course, you have heard this a lot about intelligence properties; it is still the biggest issue. An article that The Times had put out a little while back, it said that it is costing the U.S., I think, $48 billion in 2009. I think it would ‑‑ if they improved their IP protection, it would mean $87 billion to the U.S. and create 2 million jobs.
I know you worked on that, and it is something that is a big issue, but I can tell you, that is a very big issue to our country in terms of job creation, the additional economic opportunities for companies in the U.S. Where are we at on that?
Ambassador Froman. Well, it is a very high priority, and as recently as last week when we had the strategic and economic dialogue, intellectual property rights, trade secrets, cyber thefts all featured very prominently in that discussion.
We need to keep on pressing China to make progress there. We have made some progress. We reached an MOU on access for our films, which ‑‑
Mr. Buchanan. I think it is about enforcement. I mean, you might get agreement, but then try to get something implemented.
Ambassador Froman. Absolutely. And we want to see more legalization of software; the use of legal software by government agencies, by SOEs, by others. And they have stepped up their efforts in certain respects. It is not enough, it hasn’t gone far enough, it hasn’t gone fast enough.
The one thing I would say that gives us some hope is that they are beginning to see in their own country developers of intellectual property, and as that happens, there is more of a constituency within China that wants to see better enforcement of intellectual property rights. We need to capitalize that ‑‑ on that and press for further resources being put into enforcement, further metrics and benchmarks, and ensure that they are not stealing our intellectual property.
Chairman Camp. Thank you.
Mr. Nunes, for the purposes of UC.
Mr. Nunes. Thank you, Mr. Chairman.
Mr. Thompson reminded me that there is actually a letter that was sent to Mr. Froman and Secretary Vilsack on the SPS measures, and I just want to submit that for the record.
Chairman Camp. Without objection.
[The information follows: The Honorable Devin Nunes]
Chairman Camp. Ms. Jenkins is recognized.
Ms. Jenkins. Thank you, Mr. Chairman.
Thank you for being here.
Strong intellectual property right protections are essential to the success of U.S. and EU economies. In the United States alone, intellectual property‑intensive industries account for over 50 million jobs, nearly 6 trillion in output, and a trillion in exports.
So a couple questions. First, what barriers for IPR‑intensive trade in goods and services do U.S. companies face in the EU? And, second, in what areas is there potential for greater convergence between U.S. and EU IPR practices, and how can the United States and the EU enshrine high levels of protection in those areas in which harmonization is not pursued?
And I would be interested in hearing about not only patents, trademarks and copyrights, but also about protection of trade secrets from disclosure by governments.
Ambassador Froman. Well, it is ‑‑ intellectual property is a critical part of our economy, as you said, and it is a critical part of our relationship with the EU as well. And we both have quite high levels of IPR protection, although they are somewhat different in terms of the number of years of protection or exactly on how they are implemented.
We see the T‑TIP negotiations as giving us an opportunity to work together with the EU to raise the standards overall for the global community, for the global economy, and to work vis‑à‑vis third countries where we have common interests to help strengthen intellectual property rights enforcement.
On a bilateral basis we have our differences. Geographical indications is one area, and we want to make sure we protect the trademarks and the common product names of our products. But we see more commonality in terms of the overall levels of protection between the U.S. and EU than with a number of other markets, and as a result we see the opportunity to really work together to set high standards around the world.
Ms. Jenkins. Okay. Thank you. I yield back.
Chairman Camp. Thank you.
Mr. Blumenauer. Thank you, Mr. Chairman.
Welcome, Ambassador. We have appreciated the professionalism, and the hard work, and the skill of the USTR. Look forward to working with you, the other committees, members.
I appreciated our earlier conversation about the importance of labor and environmental protections, which, I think, working with you for the extent to which we are able to protect and enhance, I think that makes it better for everybody all the way around.
My friend Mr. Neal referenced the footwear industry. You talked about going to New England. I think that is terrific.
I would ask unanimous consent to enter in the record a letter that we had submitted with my friend Aaron Schock, almost 50 Members of the House, that talked about the value chain of footwear.
[The information follows: The Honorable Earl Blumenauer]
Mr. Blumenauer. I would hope that you would be able to visit Portland, Oregon, and look at part of that supply chain. I represent people who manufacture shoes in the United States, Danner Boots, King Footwear. We have got a whole range of others, however, because although less than 1 percent of footwear is manufactured in the United States, the vast amount of the value chain is here. Companies like Nike, New Balance, King, others ‑‑ not New Balance ‑‑ well, New Balance also ‑‑ their design, promotion, the intellectual property, the engineering, the sales, the marketing, a huge amount of the value is here. And we are trapped in the past with a tariff structure that is outmoded, long ago ceased to actually have any rational bearing on the marketplace, and, in fact, translates into a very substantial sales tax, particularly on the lower‑end product. And it would be exciting if we could have some meaningful work with the treaty negotiations that you are under way with to do something meaningful in terms of tariff reduction to be able to promote that entire value chain.
I mean, do you have any thoughts or observations? You can accept the invitation to come visit us. We would be happy to put tech and and and wine into the mix as well.
Ambassador Froman. Thank you. Thank you, Congressman.
You know, I would say on the footwear issue in particular, and this goes to some other products as well, we have got multiple interests at stake, as you say: the domestic producers, those who are assembling product that is being imported, the retailers, the consumers. And one thing we have to do is weigh all those interests and find the best possible path, and one in particular that supports the most jobs in the United States.
And so we are looking at all those issues. We recognize the sensitivities. And we hope to be able to strike a balance that addresses the multiplicity of interests at stake.
Mr. Blumenauer. Well, I appreciate that. And, as I say, we would be able to show you in our community people who are manufacturing, but also the design, the production, the engineering, the sales, thousands of very high‑paying jobs right here in the United States that support that mechanism that you talked about.
Chairman Camp. All right. Thank you.
Mr. Paulsen. Congratulations, also, Mr. Ambassador. I echo the comments of some of my colleagues.
I want to shift gears and just talk about India real quick. You are aware that many U.S. businesses and investors are facing issues that are significantly impeding their ability to compete in India. And, as you know, Congressman Larson and myself, we recently sent a letter with 170 of our colleagues ahead of last month’s U.S.‑India strategic dialogue urging the administration to make India’s deteriorating environment for intellectual property a focus for that dialogue.
I know last week India announced a review of its preferential market‑access policy, which requires information technology products to be produced in India as a condition of sale. That is a policy that would violate fundamental global trade rules, obviously. But that review does not solve the problems facing the information technology sector in India. It doesn’t do anything to address the serious concerns in other sectors, including the solar industry. And it doesn’t do anything to address discriminatory tax treatment or stop the blatant theft of American intellectual property.
The primary forum to discuss bilateral trade investment issues is the Trade Policy Forum, which USTR cochairs, but it hasn’t been held since 2010. When do you expect to hold the next Trade Policy Forum? What can we do to support you in these efforts? And what is the administration doing to ensure that U.S.‑India trade and investment relationship is on a positive trajectory down the road?
Ambassador Froman. Well, thank you, Congressman. And this was very much at the center of the agenda last week when we had the U.S.‑India CEO forum. We had the Finance Minister, the Trade Minister, and Deputy Chairman of the Planning Commission in town for a series of meetings precisely on that issue of the investment and innovation environment in India, how it is affecting our bilateral economic relationship, how we might be able to address it.
And I had very good conversations with my new counterpart, the Trade Minister Sharma there, and we have agreed to have our staffs work closely together to tee up and try and resolve a number of the outstanding issues so that we can have a ministerial‑level Trade Policy Forum sometime in the future. But we want to make sure that the groundwork is laid and that we are making progress towards resolving those issues in the run‑up to that meeting.
Mr. Paulsen. And what can we do to help support you in that effort, knowing that this is a town ‑‑ Congressman Crowley and others, we had a little meetings also with the Finance Minister recently, had a great conversation to keep that dialogue going. But what else can we do to support you in your effort?
Ambassador Froman. I think it has been very important for India to understand the breadth of concern in the business community, in Congress, the bipartisan basis of that concern. I think it helps focus the attention on what needs to be done. It is one thing if we say it to them, but if they are hearing it also from a variety of other sources, I think that is very ‑‑ that is very positive, and I would encourage you to continue that.
Mr. Paulsen. Thank you. I yield back.
Chairman Camp. Thank you.
Mr. Marchant. Welcome, Ambassador.
I represent 700,000 people that live and work within 30 minutes of the ‑‑ one of the great trade hubs in the United States, DFW Airport. Trade agreements equal high‑quality and high‑paying jobs in my district, and it isn’t just ‑‑ it is an equation that is a district equation. And so we are very interested in your success and want to let you know that we are more than willing to help in any way.
My question is about the TPP. The TPP is meant to be a living agreement that could eventually be the basis for a free trade area for the Asia‑Pacific. Such a free trade area would further integrate the United States into the supply chains that cross the Asian‑Pacific region, benefiting our exports and increasing our competitiveness.
I understand that now the focus is properly on competing a high standard and ambitious TPP agreement; however, we need to lay the groundwork so that the Pacific Rim countries from Latin America through Asia that meet the high standards will eventually join and increase the value of TPP. What is the USTR strategy for ensuring that this can happen?
Ambassador Froman. Well, thank you. And, as you said, our focus right now is trying to complete this agreement this year with the 12 countries that will be part of it, but we have always envisioned this as a living agreement, as a platform to which other countries could ultimately accede if they so wished. And we heard expressions of interest, formal and informal, from a number of other countries who are following TPP’s progress with great interest, and who we expect may want to join in a second tranche of countries sometime in the future. But our focus for now is just bringing this first tranche to a close.
Mr. Marchant. Mr. Chairman, I would like unanimous consent to submit a question for the record concerning our relationship with Taiwan to the Ambassador.
Chairman Camp. Without objection.
Mr. Marchant. Yield back.
Chairman Camp. All right. Mr. Davis.
Mr. Davis. Thank you very much, Mr. Chairman.
Let me add my congratulations, Mr. Ambassador.
You know, as we experience globalization, there seem to be more and more small, moderate, minority‑owned, women‑owned businesses who are trying to get into the pipeline and make use of opportunities to do business abroad. How helpful does your office expect to be to help these individuals make connections, contacts, and get moving?
Ambassador Froman. Well, thank you very much for asking that question, because getting small and medium‑sized businesses into the export business has been a major focus of the administration, and we want to do more on that.
A couple of years ago, Ambassador Kirk launched an SME initiative at USTR. And more broadly in the administration, through the National Export Initiative, and through the works of the Export Promotion Cabinet, we made increasing the number of small, medium‑sized businesses who export a major objective. And we went at that by, one, increasing the availability of trade finance and working with community banks, who have the best relationships with small and medium‑sized businesses, to bring them into the trade finance business. We also looked at the array of points of contact that the administration, the government has with small and medium‑sized businesses, the SBA, the commerce offices around the country, to ensure that they were trained and capable of providing small and medium‑sized businesses with the kind of advice they need about how to begin to export, how to evaluate a market, and how to navigate their ways through the various procedures that they need to navigate. So this has been a major priority of ours.
In TPP itself, we have a small and medium‑sized business chapter. And the objective there is to be able to look back at TPP as it is being implemented to ensure that the benefits of TPP are also going to small and medium‑sized businesses and to make adjustments as appropriate.
So this is a high priority for us. We agree these are the drivers of jobs in the United States, and we think there is much more that we could do to help these companies become part of the global economy.
Mr. Davis. Thank you very much. We had a great relationship with Ambassador Kirk and look forward to working with you.
I yield back.
Chairman Camp. All right. Thank you.
Mr. Reed. Thank you, Mr. Chairman.
And thank you, Ambassador, for being here today. And I offer my congratulations and also my personal thanks for all the hard work on Korea in particular that you were involved with and that we worked on with Korea, Colombia, and Panama.
I represent upstate western New York. I have got companies like Nucor Steel, Corning Incorporated. So I am very concerned about making sure that we are enforcing our trade provisions to the fullest extent possible to make sure we have that level playing field that is critical to the future of America and American manufacturing in particular. So just want to make sure I have a clear understanding that you and I agree that enforcing our trade remedy laws is something that protects American jobs, good for American jobs.
Ambassador Froman. Absolutely.
Mr. Reed. And when it comes to intellectual property, for example, at Corning Incorporated, and the trade secrets and things like that, would you agree with me that being able to point at our U.S. criminal and civil laws is critical in your negotiations as you go in regards to the trade agenda across the world?
Ambassador Froman. Well, certainly the whole area of trade secret theft has been of great concern to us and a high priority. And Corning is one of the specific cases we have advocated for aggressively with China to try and see if we can help resolve that case.
I don’t know enough about the criminal and civil laws to comment on the relation between that and what we are doing on the trade side other than to say that we have underscored that trade secret theft is unacceptable, and that it is important that these issues, both the individual cases, but also the broader message from the Chinese leadership that trade secret theft won’t be tolerated, has got to be a critical part of moving forward.
Mr. Reed. Well, I so appreciate that commitment, because that is an important piece to me, obviously.
Is there anything that you would recommend to us from a legislative perspective to champion to put you in the best position to accomplish your job in regards to that trade secret initiative?
Ambassador Froman. Well, I would say the following, and I mentioned it in my opening statement a bit. Our ‑‑ my biggest worry at the moment is really about ‑‑ is about resources. USTR is lean, it is nimble, but it is highly constrained at the moment for all the reasons that we know, between sequestration and other budget cuts, and it is forcing us to make hard decisions between what negotiations we can engage in and how, what other market‑opening measures we want to pursue, and what enforcement cases we can bring.
And so I am quite concerned that we will manage our resources to the best of our ability, we will do the best we can to meet our various priorities, but, frankly, I think USTR gets the biggest bang for the buck of anyplace I know. And I think making sure that we are fully resourced to be able to achieve the kinds of enforcement gains and negotiating and monitoring gains that you identify are very important.
Mr. Reed. I appreciate that, and if there is anything you need from our office, don’t hesitate to reach out. I look forward to working with you, I truly do, Ambassador. Good luck.
Chairman Camp. Thank you.
Mr. Griffin. Thank you, Mr. Chairman.
Thank you for being here. I want to talk to you about SPS enforceability. And I think my colleague, Mr. Nunes, talked a little about this.
I believe that you discussed the current arrangement, which is to go through WTO procedures to deal with this, as opposed to having something in the agreement itself. Is that a fair characterization?
Ambassador Froman. Well, in TPP, as we seek to negotiate ‑‑ and, of course, we are still in the midst of negotiating ‑‑ as we seek to negotiate what we are calling SPS‑Plus disciplines, we want to make sure that they are fully implemented. Many of the SPS disciplines, SPS‑Plus disciplines, go to a future elaborating how countries’ WTO commitments are to be implemented. So, for example, that regulations be based on science, it describes how that science should be applied, or what kinds of relevant science there are to apply and how that should be discussed. Those underlying commitments, those underlying commitments to apply science, are subject to WTO dispute resolution.
Mr. Griffin. Right. And that process is laid out in the WTO agreement, not in the agreement that is being negotiated here.
Ambassador Froman. What we have got in TPP is both the WTO dispute resolution process on the substance of the SPS commitments, but also separate TPP disputes element on the procedural enhancements that we are seeking to achieve.
Mr. Griffin. I have looked at this and talked with some of my constituents, and I am concerned that there are not enough ‑‑ there is not enough teeth and efficiency in using the WTO dispute resolution process as opposed to elevating this and creating a more effective mechanism in the agreement itself. And this is something that I think we should pursue.
And let me ask you this: If there are voices in the administration, in the Federal Government, that disagree with me, where do those voices come from? Are they FDA? Are they worried about their science being under scrutiny? What ‑‑ I mean, the FDA is already science‑based, so where is the rub there?
Ambassador Froman. We approach this in ‑‑ by trying to figure out what is the most efficient, quickest way to resolve issues as their arise. And that is a little bit what is behind the consultative mechanism that we have proposed in TPP, because we think by being able to raise these issues through a formal process, forcing the parties to come to the table to try and resolve them can help expedite some of the resolution.
We think we have struck the right balance by leveraging off the scientific expertise of the WTO, because it really is a very science‑ and technical‑heavy set of issues, while at the same time adding a consultative mechanism that will allow us to force parties to the table and get the procedural elements addressed in the context of TPP.
Chairman Camp. All right. Thank you.
Mr. McDermott. Welcome.
I don’t know if you got promoted or demoted, leaving the White House and going over to Trade.
The last 2 years as you have worked on this TPP, the issue of access to medicines has been central to some of our concerns, and it seems like the language you have put in is really a step back for the May 10th agreements that Chairman Rangel and Mr. Levin made with the White House in terms of trade agreements.
The proposal you put out did away with the word “guarantees.” I think that is what poor countries really want are guarantees of access to the medicine within 5 years of their introduction in the United States. You got a lot of negative feedback at the time that first came out, and since that time, you have said you are in a period of reflection. Can you tell us where you are on your decision about that?
Ambassador Froman. Thank you, Congressman. And thank you for your leadership on this issue.
This is a critically important issue, and we are committed to finding the right balance to strike between protecting innovation, but also achieving access to ‑‑ access to medicines. We are in the process of engaging with our TPP partners to educate them as to what is in U.S. law. We took the feedback on our original proposal very seriously. We received a wide range of feedback. And we are in the process of figuring out how we want to take it forward, consistent with some of the principles that you laid out that strikes that balance between ‑‑
Mr. McDermott. Is there any language presently written that we can look at?
Ambassador Froman. We have not tabled ‑‑ we have not tabled new text on this issue. We are in the process of dialogue with our TPP partners about what the principles of a chapter on this might look like.
Mr. McDermott. So the only tabled proposal is the one of February or wherever?
Ambassador Froman. We never tabled that proposal. We briefed the committee here and our stakeholders on it.
Mr. McDermott. You never tabled it.
Ambassador Froman. Correct.
Mr. McDermott. Okay. Let me ask you a second question. This committee does a lot of things here, but most of them are irrelevant. But it seems to me that we ought to be dealing with GSP if we are serious about our relationship with the rest of the world. Can you just tell the committee why GSP ought to pass in the next 2 weeks and not expire on the 1st of August?
Ambassador Froman. Well, thank you. Thank you very much for that. And I ‑‑ we very much agree that GSP has both its development dynamic to it, but also very importantly it helps importers of products who can’t otherwise access those products to bring those products in and provide them to American consumers at lower costs. So we think it is both good for American consumers, but also good for development. We were comforted to see and welcomed the introduction yesterday of the bipartisan bill by the leadership of this committee to renew GSP, and we think that is important.
Chairman Camp. All right. Thank you.
Mrs. Black. Thank you, Mr. Chairman.
And welcome, Ambassador. We look forward to working with you.
I want to turn to the issue of data. One of the most important 21st century issues is the protection of cross‑border data flows, which, of course, is critical not just for service companies, but to any globalized company in any sector. Firms with global sales forces must be able to transfer the sales data back to their headquarters, and many companies across the sectors that centralize the processing of their data must be able to do so, as you know, seamlessly. The emergence of the digital trade also depends on the free flow of data across borders.
In both the EU and the United States, data privacy is protected, but we do have different systems for providing that protection. So respecting the difference of those privacy approaches, how can we ensure a robust protection for cross‑border data flows in the EU negotiations, in the Trade in Services Agreement, and also in TPP? And in what other ways has the digital revolution impacted services trade in a manner that should be reflected in these negotiations?
Ambassador Froman. Well, thank you very much.
And clearly the impact of the ‑‑ of digital ‑‑ the digital economy, of digital trade is playing an increasing role in all of our trade agreements, as you say. In TPP we have a particular focus on it, but we will also be talking about it with our European colleagues and in the services agreement.
We think the free flow of data is important for all the reasons that you say. And also, as technology develops, and the cloud develops, we want to make sure that businesses are able to structure its operations in a way that makes maximum sense. At the same time, obviously, there are privacy concerns. We want to take those seriously, and strike the right balance, and ensure that we are able to achieve those privacy concerns without distorting the free flow of data as part of the digital economy.
So those are active issues for discussion right now in TPP. We have begun that dialogue with the EU as well. And my sense is it is going to become an increasing part of our trade agreements going forward, and we would be happy to work with you and get your input on how you think we ought to be thinking about this.
Mrs. Black. I appreciate that. We can all certainly appreciate the fact that data must be protected. It is a very important part of businesses and a very important part of the flows.
Are you feeling in negotiations at this point in time that there is any really good case model that you could say, yes, this is going to work for all of our agreements?
Ambassador Froman. You know, I think TPP is farthest along in terms of the negotiation at the moment, and we will have to see where we come out on that. But I think we need to remain flexible to determine how best to raise standards and create new disciplines in each of our agreements depending on the particular partners that we’re working with.
Mrs. Black. Thank you. I look forward to working with you.
I yield back.
Chairman Camp. Thank you.
Mr. Kind. Thank you, Mr. Chairman.
And, Mr. Froman, thank you for being here and for your service to our country. We look forward to working with you and the administration on a robust fair trade agenda that can help spark the economic growth and job creation that we need in this country right now. And you have a lot on your plate.
Let me just raise a couple of the concerns, and then happy to follow up with you on. But I appreciate USTR’s report on Russia and WTO compliance and what further action needs to be taken. I and most of the members on this committee did support Russia PNTR. We felt it was important to get the sixth largest economy into a global rules‑based trading system, but there are shortcomings that I feel need to be addressed, not least of which, being from Wisconsin, their exclusion of dairy products since 2010. And I am hoping that with your assistance ‑‑ and I will follow up with you as I did with Ambassador Kirk ‑‑ that we may look at practical steps to be taken to see if we can get Russian and the Customs Union there to open up their markets to our dairy products.
Canada right now is revising their standards on dairy products, too. We are concerned about the possible exclusion of more exports into the Canadian market.
And then finally, just pivoting to TPP quickly, as you probably have seen, Prime Minister Abe’s LDP Party has been taking a lot of agricultural ‑‑ at least attempting to take a lot of our agricultural products off the table when it comes to TPP negotiations: rice, wheat, barley, pork, beef, dairy, sugar. Obviously that is very disturbing. You had mentioned earlier in your testimony the large agricultural exports, roughly 140 billion a year. We feel we can do even better than that. Japan is a late entry in TPP negotiations. Hate to see us go down the road of allowing them to unilaterally try to exclude certain products from negotiations, and I am sure we will enjoy your support on that as we move forward as well.
But there is a lot that has to be addressed. And, as you know already, it is going to be important to keep not only this committee, but other Members in the Congress informed as far as the state of negotiations, especially the large new class that has joined the Congress recently, too, who have never been through a trade debate or a trade discussion. Try to get them information as well.
But I would be interested in your perspective on Russia and where they are right now with their new‑found WTO obligations.
Ambassador Froman. Well, thank you very much. And we agree that it is very important to stay focused on ensuring that Russia implements the commitments it made when it acceded to the WTO. And there were, I think, four or five areas that we asked them to take action on. They have taken action on a couple of them, but a couple of them still remain outstanding.
You know, I would note that when we were talking about PNTR for Russia, one thing that we underscored, the value of bringing them into the WTO, is that they would be subject to certain disciplines and subject to dispute resolution when they failed to meet those disciplines. There is now a case being brought against them on the auto recycling fee in the WTO, and we will be joining that case.
And so I think that is exactly the sort of process we want to see. Obviously, we would prefer for them to implement all their commitments assiduously, but if they don’t, we will certainly go to dispute resolution as necessary.
Just with regard to Japan, it was very important to us that Japan agreed before we let them into the TPP that everything is on the table. There are no upfront exclusions. Now, obviously, every country has its sensitivities, and those will all be subject to negotiation, but we have not agreed to any upfront exclusions with regard to Japanese agriculture.
Chairman Camp. Thank you.
Mr. Kelly. Thank you, Mr. Chairman.
Mr. Ambassador, welcome and congratulations.
On the TPP, I am really interested in this. Now, I know if we are going to get the economy back on track, we have got to go after the global market. There is just no question about that. And in the district ‑‑ and we all have been talking about our districts and how important the ability to sell things all over the world is to each of our districts individually.
But on the TPP, though, you have got a heavy, heavy load there. And I am wondering, we talk about this and this sense of urgency, because I would just say that sooner, of course, is better than later, and as you see us approaching that, the challenges that you are going to have trying to get there, and I wonder ‑‑ because geopolitically right now I don’t think there is more important trade policy that we can get than in that part of the world, especially with the influence of China and all the rest of the members that are talking, NGOs, nations that are talking to you. So the biggest challenges you see.
And then on top of that, what can we do to help you here? Is there anything we can do to help you? Because I am looking at what you are doing, I don’t know how you are going to get it done as quickly as you want to get it done. And I know you said we are going to work really hard. But the biggest challenges you see.
Ambassador Froman. Well, thank you for underscoring ‑‑
Mr. Kelly. This is a big deal.
Ambassador Froman. ‑‑ the challenges ahead.
You know, this will be a complicated process to bring TPP to a close as well as these other negotiations that we are working on. But there is a lot of political will among the countries around the table, because they see this as an opportunity to set high standards, to introduce new disciplines, to have a positive impact on the multilateral trading system, and that, I think, has mobilized and motivated our trading partners to work with us to try and resolve these issues. But there will be very difficult issues that will require some tough trade‑offs at the end of the day to ensure that we can get this done.
You know, I would just add to what I said to Congressman Reed. I think our biggest challenge right now is the resource challenge, simply not having ‑‑ we have open positions we can’t fill. We have travel budgets that are constrained that we can’t send negotiators to all the rounds we would like to send them to, and we have meritorious enforcement cases we would like to bring but don’t have the capability of necessarily bringing them all.
And so I think where you all can help, I think, in the short run is in trying to ensure that we have the necessary resources and support to get our job done.
Mr. Kelly. Well, I appreciate what you are doing. I think the closer relationship we have with these countries who ‑‑ the better we are as partners also in a world that is constantly now undergoing some changes. China, to me, really scares that part of the world. And when I have been over there, I have talked to those folks, have a read pretty good relationship with South Korea, I don’t know how we ‑‑ if we don’t. Now, of course, this is a huge lift for us, but for that part of the world, if we aren’t the biggest player, and we are not the most influential, then we are going to lose out. And again, if people to look to us to be the leaders, we need to be able to do that.
So thanks for what you are doing. Any way we can help, please let me know.
Ambassador Froman. Thank you.
Chairman Camp. Thank you. Thank you.
Mr. Pascrell. Mr. Chairman, thank you.
Ambassador Froman, congratulations on your confirmation. I am sure those of us on ‑‑ all of us on the Ways and Means look forward to having a great relationship with you.
My other colleagues have mentioned today different policies that would improve our competitiveness hand in hand with the trade promotion authority: legislation on currency manipulation, strong enforcement of our trade laws, trade adjustment assistance, just to name a few.
I would like to bring your attention to something that we worked on the last 2 years. The Bring Jobs Home Act would provide tax credit for companies that bring jobs back into the United States of America. These are the kinds of policies we need if we are to get the most out of our trading relationships.
I want to zero in on the Trans‑Pacific Partnership, if I may. I would like to talk about our domestic textile industry, that which is still alive, that is. I was glad to learn of your support for this rule during your recent Senate confirmation.
I want to draw your attention to a bipartisan letter from Representatives Howard Coble, Patrick McHenry, and I sent to you, which was signed by 167 House Members, including many of my colleagues who sit on this committee.
And I ‑‑ I would like to ask, Mr. Chairman, unanimous consent to have this letter entered into that the record.
Chairman Camp. Without objection.
[The information follows: The Honorable Bill Pascrell]
Mr. Pascrell. Mr. Froman, have you reviewed this letter?
Ambassador Froman. I am not familiar with the specifics of the letter, but I am happy to discuss it with you.
Mr. Pascrell. The letter supports the inclusion of strong rule of origin language, which has really hampered us in other trade agreements; in this case, the yarn forward rule. I understand that you are negotiating strategy has yarn forward at its center. Can you update this committee on your negotiations over the rule of origin?
Ambassador Froman. Well, thank you very much. And you are right that we have ‑‑ we want to very much pursue a policy that addresses both our domestic manufacturing interests in the textile and apparel sector, as well as our other interests and strike the right balance. And we think yarn forward at the center of that proposal makes a lot of sense, and that is the proposal that we are currently negotiating with.
With regards to rules of origin more generally, those are being discussed among our TPP partners, and we are looking to make sure that across all sectors we are dealing ourselves into supply chains by making sure the rules of origin support that; that having manufacturing and production here in the U.S. is made more attractive by the rules of origin of TPP so that companies can make their decisions in a way that enhances job creation, creates jobs here in the United States.
Mr. Pascrell. So you are willing to work with the industry to find the proper trade tariff reduction arrangement that does allow for a reasonable approach, particularly during the transition period?
Ambassador Froman. Yes. I said we are very much in touch with the stakeholders and obviously with the staffs of the committees here as we try and work through these issues of yarn forward and rules of origin more generally.
Chairman Camp. All right. Thank you.
Mr. Becerra. Thank you, Mr. Chairman.
Ambassador, thank you for being with us. A couple quick points and then one crucial question.
Enforcement. More and more that I have watched and been here, my sense is that my vote on any trade deal will now hinge on enforcement, because I find that a trade deal is a hollow agreement if our trading partner doesn’t or won’t play by the rules. And so the last thing we need is to tell American businesses or American workers that we struck a good deal with a trading partner, then find that the other side doesn’t follow the rules, and we are losing jobs, hemorrhaging jobs and the rest.
Secondly, I hope that you will take a deep interest in the whole issue of currency manipulation. On a bipartisan basis more than 230 Members of this House, Republicans and Democrats, sent a letter to the President last month saying, please, please consider language on currency manipulation when it comes to any future trade deal, because what we find is that somewhere between 1 million to 5 million American jobs have been lost, shipped overseas because of currency manipulation by other countries where they artificially depress their currency so they can export more things to us. And so I hope you will really take a crucial look at that and let us know that you will be defending the American interests of both work and business.
Intellectual property. I am from Los Angeles, so, to me, if we can’t protection intellectual property, again enforcement provisions are crucial, we are going to lose some industries that have been net exporters of goods.
And finally the question to you. As I just mentioned, I am from the Los Angeles area. The Los Angeles area, because of our two ports, Los Angeles and Long Beach port, we account for some 10 percent of all U.S. trade in the U.S., and that is now 5 years running. We are the largest port in the Nation, and we are one of the largest ports in the world. Lots of folks in Los Angeles depend on the ports for their jobs; lots of Americans throughout the country do as well.
I know you have to travel all over the place, all over the world, including the west coast. I would love it if the next time you find yourself going through Los Angeles, you will give me a chance to introduce you to some of those folks in Los Angeles who create American jobs, keep American businesses thriving. And can I ask you, if you do have a chance to go to Los Angeles, we can count on you to perhaps spend a little time with some folks there in Los Angeles?
Ambassador Froman. Absolutely. I would be happy to do that.
Let me just say on enforcement in particular, we very much agree. In our view this administration’s view has been that it is not enough to negotiate an agreement and to implement it; you need to make sure that it is being fully enforced as well. And that is why we brought 18 enforcement actions over the course of this term. We brought the first super 301 case ‑‑ or 301 case in 15 years against China for subsidizing unlawfully their wind energy business. We brought the first 421 case on tires. We have brought an aggressive agenda to WTO, and we are continuing to focus on that, including through the standing up of the Interagency Trade Enforcement Center. So we are very much in line with your perspective on that.
Mr. Becerra. Thank you. Look forward to seeing you in Los Angeles.
Yield back, Mr. Chairman.
Chairman Camp. Thank you.
Mr. Crowley. Thank you, Mr. Ambassador. Great to have you before your committee. Congratulations to you. Look forward to working with you, continuing the relationship we have developed over the past few years. And thank you for your endeavors.
And I want to point out in particular we appreciate the time and the effort that you and the administration have given and put on the enforcement of trade rules, as were mentioned. As America exports more, we need to make sure that foreign barriers to trade are not erected to prevent the free flow of American goods and services, because it is one thing to have trade, but it is another thing to have trade deals that work for us and for our partners. So please keep up that focus on enforcement. I think it is paying off and will continue to do so as well.
One of the major problems for service exporters like those from New York, my hometown, is having to compete with state‑owned industries in other countries. What do you envision for the USTR in terms of how you view those enterprises? And how do you see these issues coming into play in the deals that are being negotiated right now? Japan post comes to mind, for one, as it pertains to TPP.
Ambassador Froman. Well, thank you very much. And I very much enjoyed working with you, and look forward to doing so going forward.
Certainly the role of state‑owned enterprises is absolutely critical, and that is why in TPP this is one of the areas of new disciplines that we are working to introduce into the agreement to ensure that state‑owned enterprises whose ‑‑ that are focused on competing with commercial firms, are engaged in commercial activity, that they play by the same rules and are subject to the same kind of disciplines as private firms, and that we deal with their inherent subsidies and their other inherent advantages in an appropriate way.
And equally on our bilateral investment treaties, I mentioned progress made last week with China in terms of their moving forward and wanting to negotiate a bilateral investment treaty with us. We have made clear that SOEs will be a critical part ‑‑ looking at their SOE sector will be a critical part of that negotiation as well. And we at USTR, working with our colleagues at the State Department to co-lead that effort, are very much looking forward to engaging with them on that.
Mr. Crowley. Thank you, Ambassador.
I just want to also follow up briefly on my colleague Mr. Paulsen and his referencing to India. I did not sign on to that letter of over ‑‑ almost 150 Members, but that doesn’t diminish my interest in the issue. I am the cochair of the India Caucus here in the House, and I am concerned about that level you talked about in terms of the unprecedented nature of the coming together of U.S. industries and the concern for their opportunities, or diminished opportunities, within India, and I appreciated your response as well and look forward to working with you and the administration moving forward on a positive growth agenda between our two nations.
I do view India and the U.S. ‑‑ it is probably our most important ally in this century, and we have to get this right.
So thank you, Mr. Chairman. Thank you, Mr. Chairman, for holding this committee meeting today.
Chairman Camp. Thank you.
Mr. Larson and then Mr. Smith. Mr. Larson is recognized.
Mr. Larson. Thank you, Mr. Chairman. Thank you for conducting this hearing.
Ambassador, welcome, and thank you for your outstanding service to the Nation. I want to thank you for your testimony today, and I wanted to follow up and echo on the comments of my colleague Erik Paulsen.
Over the last few months, I have become concerned on what we have heard regarding the environment for American businesses operating in India. Whether it be patent violations and compulsory licensing in pharmaceutical industries, piracy within the software and film industries, local content rules in the technology sector, or forced globalization in green tech industries, the news coming out of India has not been good for American innovators.
These challenges are of great concern to me because of what they mean for American businesses and American workers. America is at the heart of the nations of innovators, and millions of American jobs, including thousands in my State of Connecticut, rely on this very important innovation. I know that both of and the President get it, and I appreciate the fact that you stated recently at the U.S.‑India Business Council that we must begin to address these challenges.
Could you please expand on those recent comments in detail for the committee what specific steps you will take over the next year to combat the increasing challenges that Mr. Paulsen and myself outlined?
Ambassador Froman. Well, thank you. And to build on what Congressman Crowley also said, this is a very important relationship. And we should ‑‑ we shouldn’t ignore the fact that our economic relationship has developed significantly over the last few years; that there are vast areas of good cooperation, defense sector, counterterrorism, and a number of other areas. It is a strong relationship.
I think the frustration we are all hearing from the business community and others is that this relationship is not nearly achieving its potential precisely because of the policies that you identified. And that is the message we conveyed to our Indian Government counterparts last week both from ourselves, but also from the American business community, and the American business community that is interested in India, that wants India to succeed and wants to invest there. And our hope is that through these dialogues, including the Trade Policy Forum, other high‑level dialogues, including the Vice President will be going there, I believe, next week and will be conveying similar messages, that we can help the Indian Government move towards addressing some of these concerns.
We have seen some movement. Even this week they lifted certain caps on foreign direct investment in certain sectors. And so they have taken some steps, but the key is for them to be able to convey that India is a place that people want to do business, and that people can rely on as a place to do business. And that is in our mutual interest. And so we very much look forward to working with them through all these mechanisms to try and address those issues.
Chairman Camp. All right. Thank you.
Mr. Smith. Thank you, Mr. Chairman.
And thank you, Ambassador, for your presence here today.
I guess I want to add emphasis to some of the issues ‑‑ some of my colleagues talking about SPS and how important it is, and especially more specifically to, obviously, agriculture. We know that there is more U.S. pork sent to a Central American country of 7.7 million population compared to the 28 European countries that make up 500 million population. I think that there needs to be some dispute resolution contained in the agreements moving forward. And can you, I guess, respond to that and add anything you might have had to say previously?
Ambassador Froman. Well, thank you. And we agree that agricultural opportunities for export are significant. We are exporting at an all‑time high now, but there is much more that we can do, and it is a central part of what we are doing in TPP and T‑TIP as well.
And I would just say with regard to T‑TIP, we have worked very closely with our European colleagues, even before we launched negotiations, to underscore the importance of resolving some of these SPS issues, and to work with them to resolve some longstanding disputes, including over lactic acid, live swine, and a variety of other areas. We have underscored that is going to be important looking forward to address these outstanding issues.
On the issue of dispute resolution itself, as I mentioned, most of what we are seeking in TPP, what we call the SPS‑Plus chapter, the underlying disciplines are subject to dispute resolution either in the WTO or under the consultative mechanism that we are proposing in TPP. And we think that is the appropriate way of moving forward to ensure that there are efficient ways as issues arise of getting them resolved on an expedited basis. But we very much agree that this is a critical area of our trade. It is a critical area of these negotiations. We want to make sure that we have mechanisms to ensure that they are fully implemented.
Mr. Smith. Okay. Thank you. I yield back.
Chairman Camp. Thank you.
Ms. Sanchez is recognized.
Ms. Sanchez. Thank you, Mr. Chairman.
And Ambassador Froman, congratulations on your confirmation, and thank you for being here to discuss the administration’s trade agenda.
You are obviously stepping into the U.S. Trade Representative at a very exciting time. The administration is negotiating agreements with the European Union, the Pacific Rim countries, and working on a new international services agreement. We also have the issue of congressional action on trade promotion authority, or fast‑track authority, and the expiring Generalized System of Preferences program, and hopefully tougher trade enforcement rules.
I guess the main point that I want to express to you is that in the past I have been highly critical of past U.S. Trade Representatives, because all too often I think that our trade deals that are negotiated are unfair to American workers, and that they erode our U.S. manufacturing base. So I just want to share with you a few of the priorities that I think we should keep in mind as you continue your work in that office.
First of all, strengthening Customs enforcement to create a level playing field for American industries is something that I am very interested in seeing.
Aggressively trying to crack down on currency manipulators. One of my colleagues mentioned that that results in huge job losses for American businesses.
Ensuring high levels of labor and environmental standards in our trade negotiations, and specifically trying to build on the bipartisan May 10th agreement.
And also promoting U.S. manufacturing and opening up access to foreign markets.
So I look forward to hopefully working with you and my colleagues to ensure that our trade agenda keeps in mind those priorities.
You have been asked questions about aggressively cracking down on antidumping and countervailing duty violators. That is an area that I am pleased to see progress on with this administration, but I think we can be doing more there. So I am going to ask you a question specifically about the Trans‑Pacific Partnership, because I do have some concerns there.
Clearly Japan’s late entry into the Trans‑Pacific Partnership has created concerns for the U.S. automotive industry. And, for instance, the Japanese automotive companies control more than 94 percent of the domestic Japanese market, making Japan one of the most closed auto markets in the world, and that is despite the fact that Japanese auto tariffs are at zero percent. So with the TPP negotiations, how does the USTR hope to effectively address Japanese nontariff barriers?
Ambassador Froman. Thank you very much.
Obviously Japan’s auto sector has been an area of concern for ‑‑ as Ranking Member Levin said, for decades, and it is still very much a concern today. And that is why prior to allowing Japan to come into TPP, we insisted on negotiating certain upfront commitments both in terms of the reduction of tariffs in the U.S., but also in terms of access to their market, more than doubling of the PHP program, which provides for expedited entry of imports into Japan, but also agreed on the terms of reference for a specific parallel negotiation on the auto sector that will be part of TPP, will be binding, will be subject to dispute resolution. And those negotiations are focused directly at those nontariff barriers that you mention.
We are looking forward to working with the auto industry here and auto workers here to get our best understanding of their priorities for that negotiation. But this is a high priority for us, and we want to make sure that we achieve concrete results through these negotiations.
Chairman Camp. All right. Thank you.
Mr. Schock. Thank you, Mr. Chairman.
Thank you, Ambassador. We are all excited that you are in your new post, and confident that we are going to do even more on trade in the coming years with you at the helm.
I just want to bring up some ‑‑ two specific concerns that I have had, one of them that I brought up repeatedly to the previous trade ambassador and, in my opinion, really haven’t gotten a clear answer on.
U.S. biologics is an important industry in our country. From my home State of Illinois, we have several of the big pharmaceutical companies based there. Current U.S. law basically guarantees them 12 years to be able to recapture their investment in U.S. biologic medicines and pharmaceuticals.
On several occasions the administration in its budget and, we have heard, in some of the discussions has opened the door, if you will, on the potential to roll back 12 years’ protection to perhaps a 7‑year protection, as was put in the President’s budget. Obviously, that concerns that industry, certainly concerns me as their representative, if we are going to change current U.S. law which protects them up to 12 years to 7 years, which would be, you know, more than a 50 percent reduction in how many years they can recapture their earnings or their investment.
Can we get some answer from you on whether or not that is still a position the administration holds, or is the administration’s position going forward that they are going to negotiate trade agreements like they did in Korea in TPP that upholds current U.S. law; i.e., the 12 years?
Ambassador Froman. Well, thank you ‑‑
Mr. Schock. Let me just ‑‑ why the nonclarity? In other words, unless you are adamant that you are going to go to 7 years, all this is doing is creating uncertainty within the pharmaceutical industry and making them not want to invest. If we are going to stick to current law, which is what we did in Korea, moving forward ‑‑ and it is current U.S. law, by the way, and I don’t know how we agree to a trade agreement that isn’t consistent with U.S. law. Let us just say that so we remove the doubt, and we can move on to other important things.
Ambassador Froman. Thank you for that. And obviously, this is a very important issue in terms of protecting innovation in the U.S., which is a high priority.
We are currently engaged with our TPP partners in discussing how U.S. law works, the distinction between small molecules and biologics, the timeframes that are in U.S. law for each, and beginning that process of consultation with them about why U.S. law operates the way it does.
We have not tabled text yet in this particular area, but we are in the process of socializing the issues around current U.S. law with our trading partners, and obviously this will be subject to negotiation. But for ‑‑ but at the current time, our focus is on educating our trading partners as to what is in U.S. law, why it operates the way it does, and how it operates.
Mr. Schock. Do you believe you can negotiate a free trade treatment and agree to text that is inconsistent with current U.S. law?
Ambassador Froman. Well, I think what we need to do is to achieve the highest level of protection possible for our innovative industries, and the first step in that process is educating our trading partners about what is in U.S. law and why it operates the way it does.
Chairman Camp. All right. Thank you.
Thank you very much, Ambassador Froman for your testimony, and with that, this hearing is adjourned.
[Whereupon, at 10:55 a.m., the committee was adjourned.]
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